Before you start looking for your dream home, let’s find out how big you can dream. Knowing your true budget is the first and most important step in buying a home.
A home is a big purchase
It’s probably the most expensive thing you’ll ever buy, and there are lots of expenses you might not even know about. Some of them include:
Everybody’s total costs are different, but it’s almost guaranteed you won’t have that much money saved up. Hopefully you have enough for a nice down payment, but for the rest…
Yes, you need a mortgage. So determine how much a bank will lend you
Head over to the next step where you’ll find helpful tips on arranging your mortgage. But the first step in determining how much a bank will lend you is to understand how much you can afford each month. This is determined using two lending principals.
Gross Debt Service Ratio (GDSR) calculation
This lending principle simply states that your monthly housing cost should not exceed 32% of your gross monthly family income.
Total Debt Service Ratio (TDSR) calculation
This lending principle summarizes that your monthly housing cost and payments on all of your other debts (including loans, credit card and lease payments) should not exceed 40% of your gross monthly income.
Our What You Can Afford calculator will help you easily estimate your maximum affordable mortgage payment of principal and interest. Just enter your monthly income and expense amounts, and the calculator will do the rest.
Once you have used the What You Can Afford calculator to estimate your maximum monthly total, you can compare this number to the mortgage payments for specific loan amounts. Simply enter the loan amount in our mortgage calculator and the monthly principal and interest will be figured out for you.
Information provided by HowRealtorsHelp.